Proposed VAT Rate Reduction from 23% to 20% in Slovakia

Proposed VAT Amendment: The National Council of the Slovak Republic has proposed a law to amend Act No. 222/2004 Coll. on Value Added Tax, specifically to reduce the VAT rate from 23% back to 20%, citing the failure of the higher rate to improve public finances.
Government Financial Mismanagement: The document criticizes the current government for not utilizing the additional €1.2 billion generated from the increased VAT rate to reduce public debt, with the public sector deficit projected to reach €6.37 billion in 2025.
Social and Economic Impact: The proposed reduction in the VAT rate is expected to have positive social impacts and improve the business environment, as the higher VAT disproportionately affects low-income groups and fails to address the underlying issues in public finance management.
Historical Context: The document notes that the current government’s financial management has resulted in a significant increase in the public sector deficit, surpassing deficits during previous crisis years, and suggests that the burden of these financial challenges has fallen on economically active citizens.
Legislative Compliance: The proposed amendment is deemed compatible with European Union law, and its effectiveness is scheduled for July 1, 2025, aiming to alleviate some of the financial pressure on citizens and improve overall public financial health.

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